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Consumer
Think again about co-signing
NEW YORK (12/16/09)--Credit card companies continue to tighten card requirements, even to requiring a co-signer. Before you sign for family and friends, know what you’re liable for on the card (TheStreet.comDec. 4). Like many prospective co-signers, you may not realize that:
* The debt may be yours. Think about it: A card issuer wouldn’t ask for a co-signer if it thought it could collect from the cardholder. If the cardholder can’t or won’t pay, you’re next in line. * Your credit score could drop. Suppose you co-sign for your college-age daughter and she can’t make the payments. Her credit rating--and yours--is affected. And, that ding on your credit report could mean that your own loan application is denied. * You could be sued. Say you sign off on a credit card for a friend and he ends up with thousands of dollars of debt. The credit card company takes him--and you--to court to collect. You have to reveal all your assets and risk losing them to pay for purchases you didn’t make.
Co-signing on a credit card isn’t always a bad thing, according to editors in the Credit Union National Association's center for personal finance. It’s often used as a way to teach money management to responsible teenagers, especially when you provide the child with education about how to use the card and place limits on how much can be spent. Some cards issuers even provide notices to parents when their kids approach the limits. Co-signing for people outside your immediate family can be a tough call. “Just say no” could be the best policy. Explaining the financial risks may be the best way to express why you won’t be a co-signer. That keeps emotion out of the conversation and maintains harmony in the relationship. Whether it’s your kid, Uncle Marvin, or your best friend Suzie asking you to co-sign for a credit card, CUNA’s editors recommend that you--and the co-signer--discuss the “fine print” details before you pick up the pen. For more information, view the “Tough Times Series: Managing Credit Card Debt” and “Credit Cards on Campus” videos in Home & Family Finance Resource Center.
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